Question 1

Which of the following is always personal holding company income?

Accepted Answer

Dividends are considered personal holding company income as they are passive income, which is a key characteristic of personal holding company income.

Question 2

Maroon Corporation incurred the following taxes for the year 2012:  Maroon Corporation's total tax liability is:

Accepted Answer

The answer of Maroon Corporation incurred the following taxes for...

Question 3

In 2012,Fay Corporation (a calendar year taxpayer)had the following transactions:  For 2012,Fay Corporation's AMTI is:

Accepted Answer

The answer of In 2012,Fay Corporation (a calendar year taxpayer)had...

Question 4

Cave Corporation,a calendar year taxpayer,has a beginning balance in accumulated E & P of $3.5 million and current earnings of $1 million.If Cave can justify accumulations for the needs of the business of $3.7 million,its accumulated earnings credit for ATI purposes is:

Accepted Answer

The accumulated earnings credit for ATI purposes is the lesser of the current earnings or the amount justified as necessary for the business (not to exceed the beginning balance of accumulated E&P). In this case, the lesser of $1 million and $3.7 million is $1 million. However, since the beginning balance of accumulated E&P is $3.5 million, the accumulated earnings credit cannot exceed $200,000 ($3.5 million + $200,000 = $3.7 million, which is the maximum amount that can be justified). Therefore, the accumulated earnings credit for ATI purposes is $200,000.

Question 5

Ravi Corporation,a calendar year taxpayer,has AMTI (before adjustment for adjusted current earnings)of $6 million for 2012.If Ravi Corporation's ACE is $15 million,its tentative minimum tax for 2012 is:

Accepted Answer

The tentative minimum tax is calculated as 20% of the excess of AMTI over the ACE.

Excess AMTI = $6 million - $15 million = -$9 million (since the ACE is higher than the AMTI)

Tentative minimum tax = 20% * (-$9 million) = -$1.8 million (a negative amount)

However, the tentative minimum tax cannot be less than zero, so the amount is adjusted to zero.

Therefore, the tentative minimum tax for Ravi Corporation for 2012 is $0.

Note: This question is testing the concept of the tentative minimum tax and how it is calculated. It's important to recognize that if the ACE is higher than the AMTI, the tentative minimum tax will be zero.

Question 6

Chase Corporation manufactures and sells birdhouses and feeders.The company also sells similar items that are imported from foreign countries.During the current year,Chase had a profit of $600,000 from its own products but a loss of $70,000 from the imported goods.

Accepted Answer

The answer of Chase Corporation manufactures and sells birdhouses and...

Question 7

The exemption amount is phased out entirely when AMTI reaches:

Accepted Answer

The answer of The exemption amount is phased out entirely...

Question 8

Ecru Corporation sells customized outdoor grills.The company purchases various parts and materials from foreign sources for $750 and incurs $240 in labor costs at a factory in North Carolina to fabricate and assemble the product.Ecru also incurs packaging,selling,and other costs of $60 and sells the grill for $1,200.If tax year 2012 is involved,calculate Ecru's per unit:

Accepted Answer

The answer of Ecru Corporation sells customized outdoor grills.The company...

Question 9

Sweet Corporation,a new corporation,has gross receipts of $4.9 million,$6.9 million,and $8.6 million in 2010,2011,and 2012,respectively.Is this corporation a small corporation with respect to the AMT in years 2010,2011,2012,and 2013?

Accepted Answer

The answer of Sweet Corporation,a new corporation,has gross receipts of...

Question 10

During 2012,Gold Corporation (a calendar year taxpayer)has $3,500,000 of taxable income and the following transactions:  Gold Corporation's alternative minimum tax (AMT)for 2012 is:

Accepted Answer

The answer of During 2012,Gold Corporation (a calendar year taxpayer)has...

Question 11

Maize Corporation has gross receipts of $3 million of which $1 million are non-DPGR.CGS identified with DPGR is $1.3 million,while overall selling and administrative expenses are $600,000.Under the simplified deduction method,determine Maize's QPAI.

Accepted Answer

The answer of Maize Corporation has gross receipts of $3...

Question 12

Which entity is subject to the ACE provisions?

Accepted Answer

ACE (Adjusted Current Earnings) provisions are part of the corporate alternative minimum tax (AMT) system, which does not apply to the entities listed (S corporations, REITs, regulated investment companies, and real estate mortgage investment conduits).

Question 13

Blue,Inc. ,a calendar year closely held corporation,is not a PHC.If the company reports the following items,the accumulated taxable income is:

Accepted Answer

The answer of Blue,Inc. ,a calendar year closely held corporation,is...

Question 14

Tanver Corporation,a calendar year corporation,has alternative minimum taxable income of $7 million in 2012 (before adjustment for adjusted current earnings).If Tanver's adjusted current earnings is $16 million,its tentative minimum tax for 2012 is:

Accepted Answer

To calculate the tentative minimum tax for a corporation, we need to compare its alternative minimum taxable income (AMTI) with its adjusted current earnings (ACE) and use the higher amount as the base for the calculation. 
In this case, Tanver's ACE of $16 million is higher than its AMTI of $7 million, so we will use ACE as the base. 
The tentative minimum tax is then calculated as 20% of ACE, minus any regular tax liability that exceeds the tentative minimum tax. 
So, the tentative minimum tax for Tanver Corporation in 2012 is: 
$16 million x 20% = $3.2 million 
Since the tentative minimum tax of $3.2 million is higher than any regular tax liability, we can conclude that Choice B ($2,750,000) is the correct answer.

Question 15

A small corporation with unused minimum tax credits may use what percentage of regular tax as a minimum credit in 2012?

Accepted Answer

The answer of A small corporation with unused minimum tax...

Question 16

In each of the following independent situations,determine the DPAD for 2012 for the corporation involved.

Accepted Answer

The answer of In each of the following independent situations,determine...

Question 17

For purposes of the penalty tax on accumulated earnings under § 531,reasonable needs of the business does not include:

Accepted Answer

The answer of For purposes of the penalty tax on...

Question 18

Emeline Corporation,a calendar year corporation,has alternative minimum taxable income (before any exemption)of $1.28 million for 2012.The company is not a small corporation.If the regular corporate tax is $223,600,Emeline's alternative minimum tax for 2012 is:

Accepted Answer

The alternative minimum tax (AMT) is calculated as 20% of the alternative minimum taxable income (AMTI) for corporations. Therefore, 20% of $1.28 million is $256,000. The AMT is the excess of the tentative minimum tax over the regular tax, which is $256,000 - $223,600 = $32,400.

Question 19

What amount of accumulated earnings of a service type corporation is considered within the reasonable needs of a business without the corporation having to show a bona fide business reason for the accumulation?

Accepted Answer

The answer of What amount of accumulated earnings of a...

Question 20

Robin Corporation,a calendar year taxpayer,manufactures and sells candles.It has several factories in the U.S.and one in Jamaica.During 2012,it had DPGR of $4.1 million from the U.S.factories.

Accepted Answer

The answer of Robin Corporation,a calendar year taxpayer,manufactures and sells...

Quiz 3: Corporations: Special Situations

Which of the following is always personal holding company income?

Maroon Corporation incurred the following taxes for the year 2012: Maroon Corporation's total tax liability is:

In 2012,Fay Corporation (a calendar year taxpayer) had the following transactions: For 2012,Fay Corporation's AMTI is: